Citigroup: the financial supermarket is dead

Vikram Pandit understands the seriousness of the challenge ahead, if Citi wants to remain a going concern. He must break the firm up and end Citi’s disastrous experiment with becoming a financial supermarket.

Citigroup is to break up its 10-year old ”universal banking” business model by separating large parts of its troubled investment bank and US consumer finance businesses from its global commercial banking business in a dramatic attempt to ensure its survival.

People close to the situation said Vikram Pandit, Citi’s chief executive, had decided to reverse his previous backing for Citi’s ”financial supermarket” structure and split the troubled group into a ”bad bank” and ”good bank”.

The move, whose details remain to be thrashed out, will dismantle the 1998 merger between Citicorp and Travelers that created Citigroup and mark the end of that attempt to create a financial behemoth capable of serving customers ranging from huge companies to ordinary savers.

I should note that the Universal Banking model is par for the course in Europe. But, even there, we have seen some horrific results at places like UBS and RBS. I see the financial supermarket concept as a flawed structure likely to meet a timely demise.

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.